Merchant Group: Credit Card Study Deeply Flawed

Retailers are striking back since the release of a study conducted by The Electronic Payment Coalition(which represents credit card giants, MasterCard , Visa , Capital One , Wells Fargo and the regional and independent bankers). Doug Kantor, counsel to the Merchants Payments Coalition which represents 2.7m store locations and employing 50 million people, argued that the survey is in accurate.

LL: You read the column, you reviewed their answer when they were asked about the legitimacy of this study. What is your response?

DK: Calling this research amateurish would be an insult to amateurs but what these guys did was buy a few products at retailers before and after the regulation went into effect. They did no legitimate research to see if these prices went up or down during that time frame. The Coalition also did not look at the interchange fees of any of the stores. There are reports that some stores have experienced increased interchange fees. You can't conclude anything based on their research.

They made zero attempt whether the costs of goods or energy costs for these retailers went up or down. This is not a study. This is anecdotal study.

LL: What do you think of the lawsuit challenging the Fed?

DK: The Fed did not implement the law as it was written. In fact, some transactions are now higher. Before transactions less than 15 dollars used to cost 6-8 cents. Now the Fed has all transactions to be charged at about 22 cents. That is more or less triple than what companies were originally paying. The Fed reinvented a new rule about the "hidden costs" that were not put in the legislation. When the final rules were written they thought there was another category of a phantom category of costs and they crammed in those costs to come up with 22 cents.

LL: What costs did they "come up with"?

DK: A number of things. Employee labor costs, banks costs, cost of monitoring their transactions, handling unusual transactions that don't go through. The Fed was not clear on their rational. If the law suit is successful the Fed would have to redo those aspects of the rule. The Fed has made this much more complex.

LL: Are you conducting your own study now?

DK: Yes, we are working on building that data. A one or two month snap shot study like the one just done is unhelpful and inaccurate. People need to get a sense of their customer base in using their cards. A study like that takes time. We will be putting out our numbers when we have something reliable and legitimate to report. If for example a cost of a loaf of bread goes up, the study needs to reflect that. You can't repeal the laws of economy.